CROMWELL European Real Estate Investment Trust (Cromwell E-Reit) : CWBU 0% reported a total portfolio value of 2.3 billion euros (S$3.4 billion) for the first half of 2023, representing a 1.6 per cent decrease from December last year.

This comes after taking into account the valuation increases on properties under development in Italy and the Czech Republic and prior to capital expenditure, said its manager on Monday (Jul 24).

“It is pleasing to note that Cromwell E-Reit’s June 2023 portfolio valuations only declined by a modest 1.6 per cent as compared to December 2022 levels,” said Simon Garing, chief executive of the manager.

Year on year, the Reit’s portfolio valuation was down by 3.2 per cent. Cromwell E-Reit’s manager noted that this was despite a 0.74 percentage-point increase in property capitalisation rates over the past 12 months, amid rising inflation and interest rates.

It observed strong performance from active leasing and renewals of over 30 per cent of the portfolio in the last 18 months, along with high annual inflation indexation growth and continued positive rent reversions.

Cromwell E-Reit’s Dutch portfolio valuation was down by 2.6 per cent, or 16.9 million euros, due to the recent increase in the Dutch transfer tax.

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While valuations in Italy, Germany and Finland also saw moderate declines of 4.7 million to 7.8 million euros, Poland registered a significant 20.6-million-euro value reduction.

The Reit manager attributed Poland’s office decline to continued weakness in the Grade B office market and significant new supply, which further dampened office occupancy and rent levels.

On the contrary, valuation increases were recorded in the portfolios for the United Kingdom, Slovakia, the Czech Republic and France, which are mainly in light industry and logistics.

After falling 21 per cent in December last year, the UK portfolio’s valuations rebounded 7 per cent on the back of cap rate compression and a more favourable exchange rate.

The positive momentum in Slovakia, Denmark and France was generally due to higher passing rents, new leases signed, reduced vacancy and ongoing rent inflation indexation.

On average, the Reit’s reversionary yield stands at 7.4 per cent as at end-June 2023. This is about 1.5 per cent higher than the portfolio’s current initial yield.

Ahead of the Reit’s results for H1 FY2023 to be released on Aug 14, the manager projects net gearing to be around 38.2 per cent. Net asset value is expected to reach 2.3 euros.

Units of Cromwell E-Reit ended Monday up one euro cent, or 0.6 per cent, at 1.58 euros.